Markets are finally sensing that something is rotten in the economy. We have a look at what to stay on top of in the weeks to come.
The higher-for-longer crowd has rightfully been celebrating as the short end of the curve has reached pre-SVB levels. We find that structurally nothing has changed and that 10 years of ZIRP being replaced by unprecedented and unpredictable rate hikes is still bound to bring more pressure on banking and here’s why.
Regional Bank Watch: The one on balance sheets, the collateral damage, and the spillovers to USD liquidity
Why will the suffering not end among regional banks despite an abating deposit flight? How vulnerable are balance sheets? And why is USD liquidity impacted by the running FDIC intervention in regional banks? Get the answers here.
While good old balance sheet data is only available once banks publish their books, we have looked up metrics reported more frequently, which you can follow to give you an overview of just how bad conditions are for banks.
Both weekly and daily indicators of deposit flight continued to show signs of money leaving the banking system for money market funds, while banks continue to underperform. Will the Fed come to accept new all-time highs for the balance sheet?
The Fed is semi-cornered in the discussion on deposit flights and decided to neglect it in practice. Issues are likely going to accelerate on the back of the 25-bps hike. The hiking cycle is over.
The banking crisis will continue to rage until the Fed and the ECB accept the underlying reason for the deposit flight. Banks cannot cope with an über-inverted yield curve, why cuts are needed asap to contain the situation. It will likely get worse before it gets better.